201203_CT_May_June_2012_Vol32_Num3

george’s
corner
AWP Trudges On:
Moving Day(s)
T
here are two topics for this column:
1. The long and difficult search for a replacement
for AWP (average wholesale price) continues —
generating some more observations.
2. George (and Nancy) are moving — generating
some shareable observations.
First, AWP’s woes. A company that struggles with reporting drug prices has recently started a blog on the subject.
Go to it at http://www.goldstandard.com/2011/11/awpand-the-future-of-drug-price-benchmarks-3/ and spend
a few moments reading a summary of the current status.
It is one of the most concise I have seen. They asked for
comments and observations and (hopefully) some new
ideas. Not being bashful (and having invented AWP in
1969), I offered mine as follows:
It is good to see somebody opening the discussion
with a clear statement of the problem. Obviously,
I have been an observer as well as participant.
My primary observation is: The free enterprise
system requires that the seller and the buyer meet
and agree on the price. The sellers are the drug
manufacturers (not the pharmacies). The primary
buyers are government entities and private insurance companies. All of the others are furnishers of
services (not drugs) and should bargain with those
that they serve.
The only other methodology that could work
36
ComputerTalk
George
Pennebaker, Pharm.D.
would require one of the members of the drug
supply chain to be totally transparent — making
ALL of its financial data available.
The current condition is that the free enterprise
system is working everywhere except in the United
States. The buyers (primarily governments) are
bargaining with the manufacturers and getting
good prices. The U.S. has one outstanding exception. California’s Medicaid program (Medi-Cal)
sits down with the manufacturers and bargains,
resulting in huge rebates that are paid by the
manufacturers directly to the State. (Note: I have
not been directly involved, so I do not know any of
the agreed-upon details, but I do know the annual
total dollars and they are very high.)
Since no company will make financial data totally
available, the only viable solution that I see is to
change things so that the free enterprise system can
take effect and solve the problem.
Of course, if you have any comments, observations, or
maybe even solutions, please share them with me and/or
the blog. If you wish to remain anonymous, email them to
me and I will pass them on as you wish, without identifying the source. I’m a rather retired but not reticent curmudgeon who enjoys sharing in controversial discussions.
Meanwhile, it seems that each of the alphabet soup collection of replacements for AWP has proponents, but not